Organizations Present

ADP, Bank of New York, Bloomberg, Bridge Information Services, Brown Brothers, BNY Clearing, Capital Group, Credit Suisse First Boston, DTCC, FISD, Goldman Sachs, Interactive Data Corporation, JP Morgan/Chase, Lehman Brothers, Mellon Trust, Merrill Lynch, Merrill Lynch SPS, Metamatrix, Moody's Investor Service, Prudential Securities, Reuters, Standard & Poor's/CUSIP, State Street Bank, SWIFT, Swiss American Securities, Thomson Financial, Wachovia Securities

This inquiry grew out of discussions with the ANNA Service Bureau (ASB) on the relationship between ISIN, market identification code and register level identification. The goal is to determine the requirements for unique security identification and to help the industry meet the automation objectives of T+1 and STP. FISD is acting as a neutral facilitator of the discussion.

Hypothesis: As the common link for automated trading/execution systems, primary identification must contain all relevant information (i.e. all data elements required to set up and maintain security master files) essential to precisely and uniquely identify the security throughout its life span. The discussion with ANNA confirms that ISIN is a unique identifier per the ISO-6166 standard and the ISIN guidelines for fungibility. However, since ISIN is a unique issue identifier and not always a unique security identifier -- additional data elements might be required.

Financial instruments can be issued, priced, traded and settled in many ways. Market level identifiers (ISIN) do identify a security at the issue level and are valid for front office systems and for the aggregation of global positions. But the world of (cross-border/cross-location/cross-exchange) security issuance, pricing, trading, and settlement has become more complex. Different identifiers are relevant at various levels. It seems plausible that a multi-level product identification scheme might be required to identify:

• the market (regulated or not) on which the trade took place;
• the clearing system through which the trade will clear;
• the central depository or ICSD where the trade will settle; and
• the registration to perform "electronic book entry" to record changes of securities ownership.

1. New exchanges, ECN's and ATS's operate in markets where previously there was only one exchange. That means that a single security may be registered and traded on more than one exchange/ECN/ATS in the same geography. The proliferation of cross-border marketplaces also means that market level identifiers (such as ISIN, CUSIP, SEDOL) can't be relied on to uniquely identify the market where an instrument trades.
    
2. Exchanges are developing multiple trading linkages allowing their members trading access to securities held on other exchanges. In essence, securities registered on one exchange may be traded on a linked exchange. Registers of securities are not exchange or country dependent and the same security can be registered in one or many locations and traded in each. Where an instrument is held in more than one register, settlement issues can arise if client orders are taken/filled without explicit reference to the register required. Where an instrument in one register can be traded on multiple markets, efficient operations processes (such as depository management or corporate actions) will require a common identifier at the market level.
    
3. In addition, inter-depository links allow settlement to occur in multiple locations. In essence, the means of settling trades in an instrument is becoming less a property of the instrument, and increasingly driven by the market or counter-party preferences.
    
4. Finally, there are pricing/valuation/currency variations for a single instrument trading in multiple locations. Security pricing needs to be referenced at the market level